What is a block grant?

A block grant is an annual sum of money given by the federal government to a state or local government organization to help fund a specific project or program. These became official in the United States from 1966.

This form of federal assistance is often associated with support for social welfare projects, such as Medicaid, social housing, education, and job training.

Key points to remember

  • Block grants are federal funds earmarked for specific state or local programs.
  • A block grant is funded with federal funds but administered by state or local governments, the idea being that local authorities are better suited to handle local issues.
  • These programs are often intended to improve social protection programs.
  • Therefore, most block grants support public housing, health or other social services.
  • Opponents of block grants argue that they are a waste of taxpayers’ money and are often poorly spent.

Understanding Block Grants

Block grants have been used in one form or another since the 1950s. Most have supported social services, public health services or community development programs. Block grants were designed to fund these services with relatively few strings attached, allowing local governments to manage and oversee the programs.

Additionally, state and local governments may add their own guidelines and will sometimes distribute a portion of the grant to other organizations, which also have their own guidelines and rules regarding how the money is used and for what purpose.

Block grants have fallen into disuse in recent years. A 2017 attempt to revamp Medicaid as a block grant program failed. A number of block grant programs still exist. A lasting example is the U.S. Department of Housing and Urban Development’s Community Development Block Grant (CDBG) program, which began in 1974.

Critics of block grants cite the relative lack of federal oversight as a problem. In particular, the proposal to turn Medicaid into a block grant program was seen as jeopardizing the federal government’s ability to guarantee a standard level of service.

Block grants have been used since the 1960s, but have lost some popularity in recent years.

Critique of Block Grants

While block grants aim to promote social good by helping states fund important programs, some have held critical views of these programs. Because block grant recipients have great flexibility in how those dollars are actually spent, opponents argue that federal money can be misused by local authorities. Money received from block grants often cannot be tracked or audited in the same way as categorical (targeted for a specific purpose) grants, compounding these concerns.

It is therefore likely that local officials are directing block grant funding to communities with the greatest political influence in order to curry favor and votes, while ignoring the underserved communities for which the money was apparently intended.

Proponents of block grants generally claim that the programs will be more effective and more responsive to each state’s needs when decision-making shifts to the states since local authorities have more in-depth knowledge of their constituencies.

Examples of Block Grants

Three of the best-known block grant programs are aimed at social services provided at the local level:

The Community Development Block Grant (CDBG) Program

The CDBG program, administered by the Housing and Urban Development (HUD) agency, says it aims to “develop viable urban communities by providing decent housing and a suitable living environment” with a focus on “low and middle income people”. It has provided more than $160 billion in grants through mid-2021. Grant amounts are awarded according to a formula based on a community’s needs, including its degree of poverty, overcrowding and population growth.

Mental Health Block Grant (MHBG)

The Mental Health Block Grant, established in 1981, has given millions of dollars to states to help treat mental illnesses. The grant was amended in 1986 to require states to develop services based on the advice of mental health planning boards composed primarily of family members and non-treating professional citizens.

Social Services Block Grant Scheme (SSBG)

The Social Services Block Grant (SSBG) program is a broadly defined program that allows states and territories to tailor social service programs to the needs of their populations. Administered by Health and Human Services, the program aims to “reduce dependency and promote self-reliance; protect children and adults from neglect, abuse and exploitation; and assisting those unable to care for themselves to stay at home or to find the best institutional arrangements,” according to the ministry’s Community Services Office.

What are the 4 main types of grants?

Grants are awarded in several ways. The four main ones are: 1) competitive, in which bidders submit applications based on merit or need by requesting a specific amount; 2) the formula, which uses an algorithm to allocate predetermined amounts of funds based on objective needs; 3) continuation funding, where previous grants are renewed; and 4) indirect funding, with federal funds transferred to state authorities to be used for federal programs, such as transportation.

What is the difference between a block grant and a categorical grant?

A block grant can be used for a variety of purposes, with the distribution of funds being overseen and allocated by local authorities. A categorical grant is given for a singular and specific purpose, with audited distributions to ensure the intended recipient.

Do block grants increase state power?

Because block grants give states or local authorities discretion to spend otherwise federal funds, they increase the state’s power to spend in this way. Proponents argue this increases the effectiveness of grant funds since local politicians and administrators will have better knowledge of their own region than those in Washington, D.C.

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